China’s wealth gap widens

China's wealth gap is widening to an alarming level, a survey showed Sunday, in a report that urged the government to raise welfare and social security to narrow the gap.

China's Gini coefficient, a gauge of the wealth gap, reached 0.61 in 2010, much higher than the international warning line of 0.4, according to a report released by the China Household Finance Survey Center.

The coefficient was 0.56 in urban families and 0.60 in rural families, compared with a global average of 0.44 in 2010, the survey said.

China's current income inequality is quite unusual compared with the rest of the world, said Gan Li, director of the center, but he noted that a high Gini coefficient is not disastrous and is commonly seen in the process of rapid economic growth.

In the short term, the government can narrow the wealth gap through transfer payments including welfare, social security and government subsidies, and in the long term, better education can effectively equalize opportunity, the report said.

Gan said that tax increases are not necessary to increase social security and welfare. "Increased consumption and the retained profits of State-owned enterprises can provide the means for income redistribution, which means 3.8 trillion yuan each year," Gan said, noting that transfer payments can help ease a widening income gap while expanding domestic demand.

The coefficient is unlikely to see big changes in the next few years, Gan said, calling for authorities to restructure expenditures to focus on increasing social welfare instead of building roads and bridges.

Zheng Xinye, a professor at Renmin University of China, told the Global Times Sunday that the real Gini coefficient may be even higher than 0.61, since the super-rich are hard to reach for surveys.

"The widening income gap was caused by restrictions that kept small and medium-sized companies from entering high-profit sectors, as well as by employment discrimination," Zheng said. Data showed that the wage gap between finance and agriculture, which earn the highest and lowest wages respectively, has widened to a ratio of 4.2 in 2010 from 2.24 in 1997.

Zheng said that low standards for labor and environmental protection have increased the wealth of the rich at the cost of the health and income of the poor.

The government needs to protect the property rights of low-income people, Zheng said, and he called for equal opportunities for smaller companies to enter all sectors.

Greater urbanization will ease the income gap, Pan Jiancheng, deputy director-general of the China Economic Monitoring & Analysis Center of the National Bureau of Statistics (NBS), said at the survey release press conference, noting that China needs to boost economic transformation and improve social security.

China's official Gini coefficient was 0.412 for both rural and urban residents in 2000. Since then only the Gini data for rural areas had been released, standing at 0.3897 in 2011. An NBS report in December 2011 mentioned that the coefficient in 2010 was a bit higher than 0.412, without providing a specific number.